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    ‘A high employment rate for older workers does not prevent a low unemployment rate for young people’

    Protesters hold flags and placards during a demonstration on an 8th day of strikes and protests across the country against the government's proposed pensions overhaul in Calais, on March 15, 2023. France faces another day of strikes over highly contested pension reforms which President appears on the verge of pushing through despite months of protests.  As the legislation enters the final stretch in parliament, trade unions are set to make another attempt to pressure the government and lawmakers into rejecting the proposed hike in the retirement age to 64. (Photo by Sameer Al-Doumy / AFP)

    Since the announcement of the increase in the legal retirement age from 62 to 64, concerns have been raised about the risk of substitution between the employment of older and younger workers. In other words, the later retirement of 55–64-year-olds would risk restricting the entry of under 25-year-olds into the labor market.

    At the European level, figures show that the countries with the highest employment rates for older workers are also those with the lowest unemployment rates for 15-24-year-olds, such as Germany, Norway and the Netherlands. In contrast, countries characterized by high youth unemployment have the lowest employment rates among older people (Greece, Italy, Romania).

    From this perspective, France is less well positioned than the European Union (EU) average. Although correlation is not causation, it is difficult to see that one has a positive impact on the other; nevertheless, it appears that a high employment rate for older workers does not prevent a low unemployment rate for young people.

    The 2010 reform that raised the retirement age from 60 to 62 in 2018 seems to lend credence to the hypothesis. It has resulted in an increase in the employment of older people and a marginal increase in unemployment.

    Read more Article reserved for our subscribers France’s aging population is a challenge that goes far beyond the pensions issue

    Naturally, these changes are not without their problems: according to a recent UNEDIC study in March, the increase in the legal retirement age from 60 to 62 has led to an increase of 100,000 more claimants between 2010 and 2022. This figure should be put into perspective, given the trends highlighted by the labor ministry’s Direction de l’Animation de la Recherche, des Etudes et des Statistiques (DARES) in its January 2023 report on “Older workers in the labor market,” which points out that between 2014 and 2021 , the employment rate of 60–64-year-olds increased by 8.9 points and the proportion of unemployed people decreased by 9.6 points.

    This does not guarantee that delaying the retirement age from 62 to 64 will have the same effects, but the macroeconomic data do not suggest, ex post, that young people will be crowded out by older workers for any length of time.

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    The Pension Policy Council believes that “the hypothesis of a substitution between the employment of older people and young people is unlikely because of the differences in human capital and the positions held.”

    Without venturing into the theoretical terrain of the links between education, the economy and employment, it can be argued that the apparent complementarity that emerges between the employment of young people and older people is a reflection of the level of education and the degree of effectiveness of “active” policies involving expenditure targeted at reducing unemployment.

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